Protalix BioTherapeutics, Inc. (PLX) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Protalix BioTherapeutics Fiscal Year 2024 Financial and Business Results Conference Call. As a reminder, this conference call is being recorded. I'll now turn the conference over to your host, Mr. Mike Moyer of LifeSci Advisors Investor Relations for Protalix. You may begin your conference.

Thank you, operator, and welcome to the Protalix BioTherapeutics Fiscal Year 2024 Financial Results and Business Update Conference Call. With me today are Dror Bashan, President and CEO of Protalix; and Eyal Rubin, Senior Vice President and Chief Financial Officer. A press release announcing the financial results and corporate updates was issued this morning and is available now on the Protalix website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The earnings release and this teleconference include forward-looking statements. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from the statements made. Factors that could cause actual results to differ are described in the disclaimer and in Protalix's filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Bashan. Dror?

Thank you, Mike, and thank you, everyone, for joining the fiscal year of 2024 financial results and business update call. I will begin by reviewing our accomplishments over the past year and recent progress. Following my remarks, Eyal will provide a detailed overview of our financial results. We will then open the line for questions, of course. 2024 was a very good year for Protalix, as we brought a record revenues from our partners, fully repaid our outstanding debt and continued to focus R&D efforts on PRX-115, PRX-119 and other early stage candidates. I would like to start with PRX-115, which is our recombinant PEGylated uricase candidate in development for the treatment of uncontrolled gout. We produce PRX-115 through our ProCellEx platform. As we have announced last quarter, we completed all cohorts in the first-in-human Phase I clinical trial of PRX-115. This study was a double-blind, placebo-controlled, single ascending dose study designed to evaluate safety, tolerability, pharmacokinetics and pharmacodynamics following a single dose of PRX-115 in subjects with elevated uric acid levels. The results from this study were presented in the late-breaking poster at ACR Convergence Conference in November of 2024. A copy of the poster is available in the Publications section of the Protalix website. We are pleased with the results from these first-in-human study and believe they support moving forward into patients. To that end, we have been preparing for a Phase II clinical trial of PRX-115 and have been in dialogue with regulatory authorities in the U.S. regarding such a proposed trial. Our goal is to initiate the Phase II study during the second half of this year. Turning now to Elfabrio. Throughout 2024, our commercial partner, Chiesi Global Rare Diseases, continue to increase its focus on Elfabrio and invest heavily in its medical and commercial program. In December of 2024, we and Chiesi announced that the European Medicines Agency, or EMA, validated the variation submission for pegunigalsidase alfa to label an additional less frequent dosing regimen of 2 milligram per kg administered every 4 weeks in adult patients with Fabry disease in the European Union. The currently approved dose is 1 milligram per kg administered every 2 weeks. This application was supported by a revised Population-PK model and the new exposure response analysis from the clinical data from the previously completed BRIGHT Phase III program as well as its extension study. We look forward to working closely with both Chiesi and the EMA throughout their review process. And I would like to emphasize that Chiesi deserves our sincere gratitude for their partnership with Protalix and their dedications to patients with Fabry disease. Our next pipeline candidate also being expressed for Protalix is PRX-119. PRX-119 is a PEGylated recombinant human DNase I product candidate in development for the potential treatment of diseases associated with neutrophil extracellular traps, or NETs. Preclinical studies are ongoing. As we have been discussing throughout the past year, we have been focusing our R&D efforts on early-stage development assets to expand our product development pipeline. This includes leveraging our ProCellEx platform and PEGylation capabilities, evaluating drug delivery systems that may allow protective delivery of different modalities and focusing our therapeutic areas to renal rare diseases. We intend to continue this effort throughout 2025 and hope to provide you with further updates as these programs become more mature. For now, let me say that I'm excited about our R&D efforts, and we are laying the groundwork for future developments that may be truly transformative. Finally, in September of 2024, we repaid in full all of the outstanding principal and interest under our 7.5% senior secured convertible promissory notes. The repayment was financed entirely with available cash. In addition, since December 31, 2024, we have issued 908,000 shares of our common stock in connection with the exercise of warrants we issued in 2020, generating proceeds of approximately $2.1 million. The warrants expired on March 11, 2025. Accordingly, no warrants remain outstanding. This is significant for Protalix, making our balance sheet stronger and enable us to continue executing our strategy. With that, it is now my pleasure to turn the call over to Eyal for review of our financials. Eyal, please.

Thank you, Dror, and thank you, everyone, for joining today's call. Let me review our fiscal year 2024 financials. We recorded revenues from selling goods of $53 million for the year ended December 31, 2024, an increase of $12.6 million or 31% compared to revenues of $40.4 million for the year ended December 31, 2023. The increase resulted primarily from an increase of $11.8 million in sales to Chiesi, an increase of $0.6 million in sales to Brazil and an increase of $0.1 million in sales to Pfizer. We recorded revenues from license and R&D services of $0.4 million for the year ended December 31, 2024, a decrease of $24.7 million or 98% compared to revenues of $25.1 million for the year ended December 31, 2023. Revenues from license and R&D services are comprised primarily of revenues we recognized in connection with our license and supply agreement with Chiesi. The revenues from license and R&D services for the year ended December 31, 2023, included the $200 million regulatory milestone payment from Chiesi in connection with the approval by the U.S. Food and Drug Administration, the FDA, of Elfabrio granted during the debt period. The remaining decrease resulted from the completion of our revenue-generating research and development obligation with respect to Elfabrio and as Elfabrio was approved in the United States and the European Union in May 2023, from the completion of the regulatory process related to the review of the biologic license application, the BLA; and the marketing authorization application, the MAA, for Elfabrio by the FDA and EMA, respectively. As a result of the completion of the Fabry clinical program in 2023, we expect to generate minimal revenues from license and R&D services other than the potential regulatory and commercial milestone payments. Cost of goods sold was $24.3 million for the year ended December 31, 2024, an increase of $1.3 million or 6% compared to cost of goods sold of $23 million for the year ended December 31, 2023. The increase in cost of goods sold was primarily the result of the increase in sales to Chiesi. In addition, during the year ended December 31, 2023, a portion of the costs for certain drug substance sold were recognized as research and development expenses, not cost of goods sold as such drug substance was produced as part of our research and development activities. For the year ended December 31, 2024, our total research and development expenses were approximately $13 million, comprised of approximately $7.1 million of salary-related expenses, approximately $2.4 million in subcontractor-related expenses, approximately $0.9 million of materials related expenses and approximately $2.6 million of other expenses. For the year ended December 31, 2023, our total research and development expenses were approximately $17.1 million comprised of approximately $7.8 million of salary-related expenses, approximately $6.3 million subcontractor-related expenses, approximately $0.6 million of materials related expenses and approximately $2.4 million of other expenses. Total decrease in research and development expenses was $4.1 million or 24% for the year ended December 31, 2024, compared to the year ended December 31, 2023. The decrease in research and development expenses resulted primarily from the completion of our Fabry clinical program and the regulatory process related to the BLA and the MAA review of Elfabrio by the applicable regulatory agencies. Selling, general and administrative expenses were $12.2 million for the year ended December 31, 2024, a decrease of $2.8 million or 19% from $15 million for the year ended December 31, 2023. The decrease resulted primarily from a decrease of $1.8 million in professional fees and approximately $1 million in salaries and related expenses. Financial income net was $0.2 million for the year ended December 31, 2024, compared to financial expenses net of $1.9 million for the year ended December 31, 2023. The difference resulted primarily from a decrease of approximately $1.4 million in lower interest and related expenses due to the conversion of notes in 2023 and the September 2024 repayment in full of the outstanding principal interest payable under the remaining notes as well as an increased interest income net of $0.7 million. For the year ended December 31, 2024, we recorded income taxes of approximately $1.2 million, an increase of $0.9 million or 300% compared to income taxes of $0.3 million for the year ended December 31, 2023. The income taxes resulted primarily from the provision for the current taxes on income mainly derived from GILTI income, mainly with respect of Section 174 of the U.S. Tax Cuts and Jobs Act, or the TCJA. Effective in 2022, Section 174 TCJA requires all U.S. companies for tax purposes to capitalize and subsequently amortize R&D expenses that fall within the scope of Section 174 over 5 years for research activities conducted in the U.S. and over 15 years for research activities conducted outside of the U.S. rather than deducting such costs in the current year. Cash, cash equivalents and short-term bank deposits were approximately $34.8 million at December 31, 2024. Net income for the year ended December 31, 2024, was approximately $2.9 million or $0.04 per share basic and diluted compared to $8.3 million or $0.12 per share basic and $0.09 per share diluted for the same period in 2023. I will now turn the call back to you, Dror.

Thank you, Eyal. To conclude, 2024 was an exciting year for Protalix, as we are building our foundation for the future. We are gearing up for our anticipated Phase II study of our gout candidate, PRX-115, and we continue to make progress on our early-stage R&D efforts. I'm confident that our strategy, balance sheet and 3 streams of revenues will enable the next phase of pipeline development for Protalix. We look forward to updating you on our progress, as we continue to drive innovation and create long-term value for both patients and stockholders. Now I would like to ask the operator to open the call for questions, please.

[Operator Instructions]. Our first question comes from the line of Ram Selvaraju with H.C. Wainwright.

Congratulations on what has been an excellent and landmark year for Protalix. I wanted to, first of all, ask about: in the long run, what you expect to be able to provide in terms of revenue guidance based, in particular, on the royalty stream from Elfabrio and what you anticipate Chiesi would permit you to say about how the revenues from Elfabrio are progressing?

The line was bad. Can you repeat the question, please?

Yes. It was specifically about revenue guidance. When you expect you might be able to be in a position to provide such guidance, particularly as it pertains to the royalty-based revenue coming from Elfabrio and what you expect Chiesi to permit you to say about how revenues from Elfabrio are progressing?

So first, thank you. You know, Chiesi is a private company, we've discussed this in the past, so we are not revealing data on the number of patients and/or, I would say, estimated revenues from Chiesi. What we can say is that they do well. Actually, every week that passes, they add patients on to Elfabrio globally. We have reported now, if I may say, we think, a nice outcome of revenues from different fee streams, including Chiesi. Chiesi, along the years, will grow. Clearly, you can -- I mean royalty and most of the revenues will be based on royalty from Chiesi to Protalix, which is a higher margin. We say it also on our website, it is written over there, that we estimate north to $100 million in revenues from Chiesi 2030 estimation, of course, under what we see in front of our eyes. If the once in 4 weeks, we fly, it's a nice upside, will be higher, of course. And we can -- as I mentioned, it's a higher margin revenue. So as time goes by, and it cannot be, I think, judged by the quarter. We have to be -- to understand that we sell to Chiesi's inventory. So we do not sell to their, I would say, direct sales. So in time, in 1.5 years, 2 years, it will be more ongoing, if I may say. And then we can see a growing, I assume we expect at least, steady stream of revenues of higher margin than what we sell to Brazil or to Pfizer from Elelyso. So we will not and we cannot give guidance for 2025. As I mentioned, we sell to inventory. And -- but again, just to emphasize, Chiesi does well, we are pleased with the picture, and we consider this collaboration as positively strategic to Protalix.

Great. And then with respect to PRX-119, I was wondering if you could briefly delineate the differences between PRX-119 and your historical program that I believe was designated PRX-110? And also if you could provide us with some framework, some frame of reference regarding the size of the market opportunity in NETs that you previously mentioned for PRX-119 going forward?

Sure. So what I can say that PRX-119 is actually a long-acting DNase. PRX-110 was an acute one. We are finalizing as we speak, if I may say, the indication selection. We would like to finalize a couple of activities in addition to another, I would say, preclinical model. And then we will update the market, I hope within the coming 1 or 2 quarters. On the size, once we'll have the indication, we can update about the potential size, at least.

Okay. And then lastly, with respect to PRX-115, I was just wondering if you could provide us with any details regarding the total aggregate cost of the Phase II study that you are running as well as the time line to release of potential top line data as well as strategically, what you anticipate doing, assuming positive results from this study? Would you expect to take forward clinical development of this asset yourself or at that juncture look to identify a potential development and commercialization partner?

So currently, we plan to finance the Phase II with our current means. And we have the means. As we mentioned, we have sufficient, if I may say, resources to finance our operations, including the early R&D and the Phase II of the 115. About the cost, we see something, I would say, north to $20 million on the third parties expenses or expected payments. This is not including labor or internally, don't forget we produce it with our own Protalix. So there is a portion which -- we do a significant portion by ourselves. As for top line results, we estimate something like 2 years from today. It depends on the pace of enrollment, of course. Please understand, first patient in will be the second -- plan to be in the second half of this year. I assume that if indeed the outcomes will be positive, it makes sense as we look for a commercial partner.

[Operator Instructions] Our next question comes from the line of John Vandermosten with Zacks SCR.

Eyal, do you have the 4Q Elfabrio revenue number handy?

I can pull them up. Go on, John.

Yes. I'll ask another one while you are pulling that up.

Okay.

So on 115, I saw you guys had a poster out. And I was wondering if you could elaborate on the mechanism of action for 115 and its impact on urate crystals. Does it actually go after them? Or I just wanted some clarity on how that mechanism is.

John, I don't fully understand what you mean. Maybe you can define it differently.

Sure. So PRX-115, I was reading through the poster and it provided a small amount of detail on how it works. And I assume it eliminates the urate crystals or does it have some of the mechanism of action of how it affects gout. And I wanted to see if you had some clarity on that.

What we use is uricase from certain source, which is different than KRYSTEXXA, for the sake of our discussion. We have our, I would say, specific peg to cover the enzyme, which is covered, I would say, almost completely. What we see so far, and I want to be careful, in humans with hyperuricemia, which participated in the Phase I study, that we reduced the uric acid in, I would say, quickly, of course, and we see pretty long periods of time that actually the -- I would say, the level of the uric acid is very low. Once we get into patients with, I would say, refractory gout or severe gout, and have results, we can update about the fact of how it does with the tophi and the overall disease.

Okay. Great. And just Eyal, where you able to find that -- I know you're going to file the 10-K later. I just was going to put it in my model...

10-K was filed already, by the way.

It was? Okay. I didn't see it. All right. Well, I'll just find it there. That's all I had this morning.

Thank you. Ladies and gentlemen, there are no other questions at this time. I'll turn the floor back to Mr. Bashan for any final comments.

So thank you, and thank you, everybody that joined the call. We hope to continue and provide good results in the following quarters, of course. We see with high probability, I would say, a bright future for Protalix. So thank you very much.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.